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April 15, 2014
Board adopts new private lawyer referral service rules

By Gary Blankenship
Senior Editor

New rules regulating attorneys who accept clients from for-profit lawyer referral services have been approved by the Bar Board of Governors, although they are less draconian than originally proposed by the Special Committee on Lawyer Referral Services.

Carl Schwait Board member Carl Schwait, chair of the Board Review Committee on Professional Ethics, presented the changes at the board’s March 28 meeting in Palm Coast.

“We went forward and we made several amendments on what was necessary,” Schwait said. “Some of the more harsh critiques [from the special committee] were eventually overruled because we felt they were onerous to our fellow lawyers.”

One of those recommendations did not allow lawyers to accept a referral from a service that also referred the client for another professional service, such as medical care. Special committee members felt a potential conflict of interest was created because lawyers might be pressured to refer clients to the service’s other businesses.

But Schwait said the BRCPE felt that went too far, and a motion to adopt the special committee’s position failed to receive a second.

“Basically, the new rules encompass the following: That lawyers may accept referrals when they do not directly or indirectly require the lawyer to refer clients to other persons or entities [owned by the referral service] for other services and do not put any economic pressures or incentives on the lawyer to make sure referrals,” he said. “There cannot be a requirement or a quid pro quo.”

The approved amendments also prohibit a lawyer from referring clients to another entity owned by the lawyer referral service, unless the rules on conflicts of interest and business transactions with clients are met, the lawyer makes written disclosure of the relationship to the client, and the lawyer obtains the client’s informed consent confirmed in writing.

The BRCPE also kept the special committee recommendation that Bar members must report to the Bar on private referral services they use and when they leave such a service. The committee dropped a recommendation that a lawyer must also provide complete disclosure of his or her relationship with the referral service, including financial arrangements, and affirm the lawyer is following all Bar rules on referral services.

Other approved amendments include:

* Law firms accepting referrals must designate a lawyer within the firm as the responsible party for all cases referred to the firm.

* Referral clients, and not the law firm, must make the initial contact with the law firm after being sent by the referral service.

* Lawyers may not accept referrals from a service that interferes with the lawyer’s relationship and professional judgment in representing his or her client by, for example, requiring the lawyer to refer the clients to other services offered by the referral service or an owner of the referral service.

* Lawyers may not refer clients to other nonlegal services offered by the referral service or an owner of the service or a company owned by the service, unless they comply with conflict of interest provisions in Bar Rules 4-1.7 and 4-1.8, the lawyer provides a written disclosure of the relationship to the client, and the lawyer obtains the client’s written consent.

* Law firms must notify clients in writing that the lawyer received and paid for the client’s referral, if applicable.

* Lawyers may not charge higher fees or costs to referred clients than they do to nonreferred clients.

* A lawyer will not be disciplined when a lawyer referral service fails to respond to a Bar inquiry unless the lawyer has been notified by the Bar of the failure.

* Lawyer referral services must affirmatively state in all communications with potential clients that they are referral services.

* Lawyers may not accept referrals unless they have a bona fide office location.

* Lawyers may not accept referrals from services that use misleading names, including names that may cause the public to think the referral service itself is a law firm.

* Law firms may not split fees with referral services or pay a set fee per referral. An allowed fee, according to information provided to the board, is, “a fee that is not an improper division of fees would include a flat fee per time period (flat weekly, monthly, or annual fee), a reasonable fixed fee per matter referred (pay per lead), and a fixed fee per time a consumer views information about the lawyer (pay per click).”

The amended rules now go to the Supreme Court for review.

[Revised: 07-23-2014]